Well, i shouldnt buy a htpc when you can also build one yourself.
An intel atom could be great for a cheap htpc, but 1.6Ghz single core isn't much...
1 Gb RAM should be enough for a htpc too.
The point: a graphics card. If you want to play high-definition (blu-ray for example) movies, you need a decent graphics card if you dont want your screen to "freeze".
A 160Gb harddisk is pretty small also. I should recommend 1Tb+, as movies take alot of hard disk space...
That acer you suggested is NOT able to play hd/blu-ray films.
some example of a htpc build:
http://www.newegg.com/Product/Product.aspx?Item=N82E16811190087
Athenatech Black Aluminum Face Plate / Steel Chassis A3701BB ATX Media Center / HTPC Case - Retail
$71.99
^don't get a cheap plastic case. This is a really solid one. Perhaps you might want to pick a tower case too.
http://www.newegg.com/Product/Product.aspx?Item=N82E16819103681
AMD Athlon II X2 250 Regor 3.0GHz 2 x 1MB L2 Cache Socket AM3 65W Dual-Core Processor - Retail
$64.99
^You dont multitask on a htpc, so dual core is fine. And 3Ghz is more then enough! And oh, its very energy efficient also
http://www.newegg.com/Product/Product.aspx?Item=N82E16819103698
Open Box: ASUS M4N68T-M AM3 NVIDIA Geforce 7025/nForce 630a Micro ATX AMD Motherboard
$36.99
^Just some cheap but decent motherboard. We dont need onboard graphics, and we wont need more then two memory lanes.
http://www.newegg.com/Product/Product.aspx?Item=N82E16820148194
Crucial 2GB (2 x 1GB) 240-Pin DDR3 SDRAM DDR3 1333 (PC3 10600) Dual Channel Kit Desktop Memory Model CT2KIT12864BA1339 - Retail
$54.99
http://www.newegg.com/Product/Product.aspx?Item=N82E16814141114
BIOSTAR VA4673NH51-B Radeon HD 4670 512MB 128-bit DDR3 PCI Express 2.0 x16 HDCP Ready Video Card - Retail
$62.99
^The BEST graphics card in its prize range
http://www.newegg.com/Product/Product.aspx?Item=N82E16817139008
CORSAIR CMPSU-400CX 400W ATX12V V2.2 80 PLUS Certified Compatible with Core i7 Power Supply - Retail
$52.99
^NEVER buy cheap psu's
http://www.newegg.com/Product/Product.aspx?Item=N82E16822136534
Western Digital Caviar Blue WD10EALS 1TB 7200 RPM 32MB Cache SATA 3.0Gb/s 3.5" Internal Hard Drive -Bare Drive
$89.99
^1Tb hard drive for all your storage needs.
grand total: ~$435,-
You still need to add a dvd or blu-ray drive (add ~$25 for dvd and ~100 for blu-ray), and an os (i suggest ubuntu because its free).